Early in 1975, Giant Food Inc. unveiled in Severna Park, Md., the electoronic supermarket -- the first of a new generation of stores with optical scanners at the checkout counters toting up prices automatically from special codes printed on most packages.
There was an immediate outcry from some consumer groups, who warned that shoppers would be hurt by the absence of printed prices on separate cans or packages. Hearings followed in crowded rooms at Annapolis as the General Assembly considered proposed legislation to require continued manual price marking.
Similar legislative proposals were offered in Richmond and at the District Building. Members of Congress said federal laws might be required to "protect" consumers.
Naturally, the supermarkets fought to sidetrack these proposals, noting that one of the major advantages from the new technological era would be reduced labor costs if manual price marking could be eliminated.
Last month, the issue came up again in Annapolis before a State Senate committee. Five persons showed up, one in favor of the bill. Within five hours, the hearing was concluded and the legislation was shelved again. A similar bill has been offered in the D.C. City Council but there was no such proposal before Virginia's 1979 General Assembly session, now concluded.
Even though there remain flickers of interest in the idea that government somehow should move in to protect consumers from potential computer abuses, it is obvious that shoppers familiar with Giant's automated scanning checkouts here have voted strongly in favor of the process. Significantly, the manual price marking continues.
Now, Giant is about to take a giant step by becoming the nation's first major food chain to convert all of its stores to the new scanning devices and electronic inventory control systems by the end of the coming summer.
Giant Chairman and President Israel Cohen revealed this decision, which represents a startling acceleration of previous plans to have all stores converted by 1981, in an interview last week.
The son of a Giant co-founder, Cohen has worked for the food retailer from Day One, in 1935, when the company was organizing here to open its first store the following year. From driving trucks to running the company, Cohen has worked in just about every position Giant has. Until last week's interview with The Washington Post, however, Cohen never had agreed to an on-the-record press interview. "This is the first in a series of one," he quipped in a typical, acerbic preface.
The reason he agreed to talk to a reporter at all is a conviction, emphasized last week, that total transition of Giant to the electronic age is a "revolutionary" development in the retail food business. By making his business more efficient in an inflationary economy, worker productivity can be improved and consumer price increases can be kept lower than otherwise, he said.
Cohen was joined at the interview by Donald Buchanan, vice president for data processing. The Giant Food chief is extremely modest about his own role at the company, stating that "no business is a one-man business, ours in particular." At last year's annual meeting, for example, Cohen turned most of the presentation over to Buchanan and other executives to speak on their areas of expertise. And Cohen would have preferred to let Buchanan do the talking last week.
Buchanan's specific charge is to bring to the attention of management any ideas or new technology with "economic merit." Thus, in 1972, he took Cohen to an exhibit about the Wizardry of scanning equipment. "He said, 'That makes sense,' while a lot of people in the business didn't see things so clearly, and were not willing to stick their necks out," Buchanan recalled.
Insiders say Cohen has been running Giant's basic food business with a similar touch of quiet common sense for many years, even when the flamboyant Joseph B. Danzansky was president from 1964 to 1977. Cohen believes in the principles that the family owners have followed from the beginning, of seeking to attract consumers with a quality operation. He sprinkles his conversations with succinct expressions of wisdom.
Although Cohen certainly is one of a handful of the most important business leaders in Washington, you won't find his name in Who's Who. He has worked hard to take attention from his own achievements and shower it on his associates. Cohen describes 12,000 persons who work for Giant as "associates, family, people." Or, "We don't have employes."
His associates respect Cohen and his business judgment, displayed most vividly in Giant's day-to-day operations. He makes the final decisions and they are carried out. So, with Cohen's order "to do it," Giant became the supermarket industry leader in installation of electronic scanning devices at checkout stands. The local firm, based in Prince George's County, is not the only food chain committed to the new technology, however. California-based Ralph's, a subsidiary of the Federated Department Stores; Winn-Dixie, a large southeastern chain based in Jacksonville; and Publix Food Stores of Winter Haven, Fla., all plan full scanning operations within several years.
But Giant already has converted 62 existing stores to the new technology and installed the computer facilities in 16 new units for a total of 78 stores, or 67 percent of its total chain, which is concentrated in the metropolitan markets of Washington, Baltimore and Richmond.
What Cohen now has decided -- virtually overnight -- is to convert the 39 remaining stores to scanning devices at a rate of two a week through August. If the schedule authorized by Cohen and distributed internally to key executives last week is followed -- which seems likely, because Cohen's involvement is always a signal to subordinates that he expects action -- Giant supermarket No. 111, at 13344 Laurel-Bowie Rd., will open with scanner checkouts on Aug. 20. It will be the last store to be converted.
The final conversion program starts this week when scanner checkouts open in the Giant stores at 4201 Branch Ave., Marlow Heights, and 7115 Arlington Rd., Bethesda.
Since scanning conversion costs about $200,000 for each existing store and installation costs some $160,000 for new units, the electronic investment planned by Cohen through August will be about $8 million of a total capital investment program of some $38 million planned for Giant's 1980 fiscal year, which began last week.
All of these funds will be generated internally by a company that is among the most healthy in an industry where profit margins are extremely thin and some companies are failing or very weak.
Giant sales in the year just ended have been estimated at $1.08 billion compared with $936 million a year ago, and analysts have guessed that profits from continuing operations rose about 10 percent from fiscal 1978's $13.6 million ($4.14 a share) to about $15 million ($4.55) or more. Nationally, Giant is among the two dozen largest food chains even though its operations are confined to a relatively small region.
Industry statistics indicate that Giant has passed Safeway Stores Inc., the nation's largest food retailer, to become the largest supermarket business in the Baltimore-Washington market. Giant's share of the market represents about 25 percent of all food purchases and appears to be growing; in metropolitan Washington, Safeway and Giant each account for about one-third of all food sales.
Although Safeway is the industry giant, it has been slow to turn to the new technology -- preferring to let others make mistakes before it finds the right equipment. Two area Safeways' have scanning facilities at checkouts on an experimental basis.
"Everyone would love to convert but the biggest problem is finding the capital," Cohen said of the industry's slow introduction of scanning for checkouts and inventory control.
Referring to such developments as the recent Food Fair bankruptcy and a West German firm's attempt at rescuing the once dominant U.S. chain, the Great Atlantic & Pacific Tea Co., Cohen said that, in his business, "There is no instant success; there is no instant failure." He added: "Nobody beats you but yourself; the better chains are getting bigger."
Supermarket management today is a profession in which "no matter what we do, the most we will earn is 1 1/2 cents on every dollar. If we gave back all of our profits to the consumer, that would be 12 cents to 15 cents on a $10 order," he noted.
It is because of this slim possible margin, which many food chains have failed recently to approach, that Giant is seeking every possible method to improve productivity, the Giant chief stated.
"We're not looking at this mainly from a savings standpoint... we're looking at the advantages of having a total, companywide system," said Cohen, who likened the technological changes at his supermarkets to the necessary but revolutionary innovations in newspaper production, designed to maintain viable businesses in a climate of soaring operating expenses.
Cohen said the revolution began only with the development of scanning equipment tied to cash registers and inventory control in systems developed by International Business Machines Corp. (used by Giant) and other firms.
The biggest advance represented by the new technology -- and the biggest benefit to shoppers -- is accuracy.
After a selection of goods is toted up, the consumer receives a register tape that includes, for the first time in food retail history, an understandable description of each item, the price of each, an indication of whether the goods are taxable, a record of credits or coupons, total change, the date, time, store and checkout counter used.
Consumers can follow prices of various goods week to week by filing the receipts and are more able to catch errors. Extensive research has been conducted on the subject of accuracy because some consumers have claimed that this area represents their major problem with the new technology.
Buchanan said that with conventional checkouts, many items that were marked erroneously went through checkout counters without being caught. Of thousands of individual items, random checks at stores used to turn up as many as 300 incorrectly marked items.
Today, incorrect manual marking has been reduced sharply and the computerized price base provides a checks-and-balance system because consumers are able to see if the computer prints out a price different from that marked on a can of beans, for example.
Cohen has emphasized that if a can is marked 62 cents but the computer says the actual price is 72 cents, the customer always must be given the lower price. But Buchanan said research has found that the computer is right on 99.9 percent of all items that are scanned. To the extent that customers now find errors, it is "to their advantage. Our pricing accuracy has a lot more exposure than we've ever had before," Buchanan added.
In addition to improved accuracy, Cohen and Buchanan listed the advantages as follows:
More rapid service at the checkout counter, including quick verification of company-authorized check cashing cards. Studies have found that the checkout time for an average 28-item order in a Giant store has been reduced up to 30 percent to less than three minutes.
An ability to monitor deliveries by vendors who sell products to Giant at wholesale, "from the moment it enters the back door to when it goes out the front door." Data goes every night by computer hookups from stores with electronic scanners to Giant's big headquarters complex in Landover, detailing the sale of every item and providing the firm with an opportunity to replenish supplies more rapidly.
The capability of making sure that each store is carrying the right products, depending on the demographics of a neighborhood and special ethnic food interests, based on instant sales data.
Total inventory control throughout the company and immediate use of information to analyze the effectiveness of advertising (all print ad work is handled by what amounts to a large, in-house ad agency and creative staff).
"If you don't have it (a specific item) on the shelf, you can't sell it and you lose the sale. Now we can run a better store because we won't run out with a faster reordering process," Cohen said.
As for worries about manual price marking on every item, Cohen said there are no plans to discontinue this practice despite potential savings in labor costs. "I'm not sure the benefits of such savings may not be offset by the most important thing, consumer confidence and credibility," he said. And a trade publication, Supermarketing, reported last week that elimination of item price marking is far in the future.
"It's going to take a great many more stores converting to scanning before the public has confidence enough in the system to accept unmarked items," the publication said.
Giant, meanwhile, plans to open seven more combined food-pharmacy stores this year and another seven in 1980, all concentrated in the Baltimore and Washington markets. Cohen said Giant does 92 percent of its business in the megalopolis that stretches from the eastern suburbs of Baltimore to Fredericksburg. Gradual expansion is planned in the Richmond market and on Maryland's Eastern Shore, but not in the immediate future.
Cohen said Giant is "actively seeking" sites in the District, if ground becomes available on which a large store can be built. In a joint venture with new O Street Market store in the inner city within a year.
The Giant chief, although 65 years old, has no plans of stepping down from his job.